Subcommittees of the Executive Risk Committee - The various subcommittees provide oversight of the processes whereby the risks assumed across CWB are identified, measured, monitored, held within delegated limits and reported in accordance with policy guidelines. They include: Group Credit Risk Committee - Approves loans within delegated limits and is responsible for ensuring that appropriate credit standards and guidelines are in place. An escalation subcommittee of the Group Credit Risk Committee considers risk-adjusted pricing exceptions and reputational issues that may be relevant to specific loans; Group Asset Liability Committee (ALCo) - Reviews and approves operational guidelines and programs for liquidity management, funding sources, investments, foreign exchange risk, interest rate risk and derivative risk;
Group Capital Risk Committee - R esponsible for the oversight of capital adequacy, CWB’s regulatory capital plan, ICAAP and stress testing;
Group Non-Financial Risk Committee - Reviews the Operational Risk Management framework, operational loss reporting and business continuity plans. Reviews action plans for mitigating and strengthening the management of operational risk;
Group Forecasting Committee - Develops an enterprise-wide view of the economic outlook; and,
Model Risk Committee - Develops and oversees CWB’s Model Risk Management framework and model deployment.
The following oversight functions provide key support within the Risk Management framework:
• Risk Management - The CRO, who reports functionally to the Board Risk Committee, leads a diverse team of risk management professionals organized to provide independent oversight of risk management, risk governance and control. As the second line of defence, the mandate of the GRM function is to provide independent oversight of risk-taking decisions, independent assessment of risk and effective challenge to the business. This function establishes the Risk Management framework to identify, measure, aggregate and report on all material risks managed by the first line within our three lines of defence framework. This includes oversight of risk governance policies, establishment of risk appetites and key risk metrics, and development of risk infrastructure, including risk management processes and tools. The risk management function supports a disciplined approach to risk-taking in fulfilling its responsibilities for transactional approval and portfolio management, risk reporting, stress testing, modelling and risk education. • Finance - The CFO, who reports functionally to the Audit Committee, leads a team responsible for the development of financial strategies that support our ability to maximize sustainable shareholder value, and the production of reliable and timely reporting of financial information to management, the Board of Directors, shareholders, regulators, and other stakeholders. The team provides independent oversight of processes to manage financial reporting, external credit ratings, certain regulatory reporting and tax. • Legal, Compliance and Investigations - Provides second line oversight of legal, regulatory compliance, financial crime (including fraud, corruption and bribery, and anti- money laundering risks) and reputation risks with established and maintained policies, and standards used by the first and second lines of defence to identify, measure, mitigate and report on significant risks. • Internal Audit - Reporting directly to the Audit Committee, internal audit is the third line of defence in the Risk Management framework, responsible to provide management and the Board of Directors with objective, independent assurance as well as advice on the effectiveness and efficiency of governance, risk management, and internal control processes and systems. • Human Resources - Provides second line oversight of people risks across the organization by establishing and maintaining relevant policies, frameworks and standards related to workforce practices and safety. RISK APPETITE The purpose of the Risk Appetite framework is to define the type and amount of risk we are willing to assume through our business activities, while considering the priorities of all stakeholders. Risk appetites for key risk types are established based on both quantitative and qualitative factors by GRM and other corporate functions, as the second line, endorsed by senior management and ultimately approved by the Board of Directors. The Risk Appetite framework is forward-looking and aligns with our strategic growth objectives, including consideration for our regulatory capital plan and budget processes. Key components of our Risk Appetite framework include:
• Risk Capacity - The maximum level of risk we can assume before breaching regulatory or other stakeholders constraints; • Risk Appetite - The aggregate level and type of risk we are willing to assume; and,
• Risk Limits - The allocation of risk to specific risk categories, business units and lines of business, at the portfolio or product level. The allocation of our risk appetite across CWB is established starting with limits at the Board Risk Committee level, with smaller limits assigned through levels of the organization supported by the establishment of delegated authorities limits which represent the maximum level of risk permitted for a line of business, portfolio, individual or group and are used to govern ongoing operations prudently within Board approved risk appetites.
Key attributes of our overall risk appetite include the following:
• An appropriately conservative risk culture that is prevalent throughout CWB, from the Board of Directors to senior management to front-line employees; • A philosophy to only take risks that are aligned with our strategic growth objectives and are expected to create sustainable, long-term value for stakeholders; • A philosophy to only take risks that are transparent and understood, and that can be measured, monitored and managed; • Careful and diligent management of risks at all levels led by a knowledgeable and experienced leadership team committed to sound management practices and the promotion of a highly ethical culture; and, • Targeted financial and operational performance, which supports maintenance of satisfactory credit ratings to maintain competitive access to funding.
48 | CWB Financial Group 2022 Annual Report
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